Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
Is there no stopping the broad-based S&P 500 (^GSPC 1.22%)? Based on numerous strong earnings reports this morning investors would collectively say, "No!"
With U.S. investors still adjusting to the start-up of the government following a 16-day shutdown, and economic data at a minimum, investors again chose to ignore the fact that in just four months we'll face another debt-ceiling debate. The focus was instead on the relatively strong earnings reports delivered thus far in the third quarter.
By day's end the tech and service sectors had helped push the S&P 500 decisively higher by 11.35 points (0.65%) to close at another new all-time high of 1,744.50, the index's sixth gain over the past seven sessions.
Leading the pack today in a big way was restaurant chain Chipotle Mexican Grill (CMG 2.52%) which advanced a whopping 16.1%, or more than $70 per share, after reporting its third-quarter results. Oddly enough, despite a 15% increase in income, Chipotle actually missed Wall Street's earnings-per-share estimate of $2.78 by $0.12, but forecast strong same-store sales growth for 2014. In addition to better-than-expected customer traffic during the quarter, Chipotle's management noted that it may consider raising its prices by 3%-5%, but would leave it up to food inflation to dictate that move. Chipotle shares had been under pressure recently because of the company's reluctance to boost prices that have constrained margins. A price hike could threaten to drive a few customers to competitors, but the chain's recent boost in customer traffic might be more than enough to offset that difference.
Not far behind Chipotle was Internet search engine Google (GOOGL 10.17%) which jumped 13%, or more than $122 per share, to close above $1,000 for the first time ever. Like Chipotle, third-quarter earnings were the main driver here with Google topping both Wall Street's revenue and EPS estimates. For the quarter, Google delivered a 12% increase in sales to $14.89 billion as adjusted EPS improved to $10.74. Comparatively, Wall Street expected something closer to $14.8 billion in revenue and just $10.34 in EPS. Google noted that 40% of its YouTube revenue is now coming from mobile, yet once again the cost for ads declined since mobile advertisements generate less revenue than those for PCs. Despite its market-leading position in the ad space for PCs, I still think Google is very much exposed to market share losses in mobile and could see downside pressures with its Motorola unit delivering hefty losses.
Finally, solar panel producer First Solar (FSLR 2.11%) jumped 8.7% less than two days after announcing a deal with NextEra Energy (NEE -0.96%), the United States' largest alternative energy provider based on generating capacity, to build a 250-megawatt solar plant in Southern California. First Solar has rebounded in a big way thanks to large project wins like this, as well as struggles by Chinese competitors that are now buried under debt and being kept out of certain international markets due to tariffs. The deal allows NextEra to be positioned for lower costs than its peers in the future, while First Solar adds to an already impressive revenue backlog.
